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Billions lost due to sham contracts in construction

Natasha Wallace

LOW-WAGE construction workers are being systematically exploited on some of the state's most high-profile public projects, employed under dodgy contracts and later paid out by some of the country's biggest builders.

Billions in wages, superannuation, tax and worker's compensation are disappearing down a regulatory black hole in an industry rife with allegations of corruption and maladministration.

The Herald has investigated 15 cases of so-called sham contracts over the past year in NSW, including for the University of Sydney's $17.2 million medical school at Nepean Hospital, the Federal Court, Wollongong TAFE and the University of NSW.

The Construction, Forestry, Mining and Energy Union estimates up to $2.5 billion is lost in tax revenue each year as a result of sham contracting. It occurs when workers are disguised as independent contractors, usually working under an Australian business number, and are duped out of employee entitlements such as holiday pay, super, sick leave and workers' compensation.

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Millions more are lost in unpaid super as well as payroll tax and workers' compensation premiums evaded.

In the 15 cases examined by the Herald, major NSW builders, including Reed Constructions, Richard Crookes Constructions, Bovis Lend Lease, St Hilliers and Kell & Rigby Pty Ltd, have had to pay out an average $20,500 to workers for unpaid wages and entitlements after their contractors or subcontractors hired labour under sham contracts.

These companies all said they were unaware of the sham arrangements down the subcontracting chain.

Some of the major builders in the cases examined by the Herald accused their contractors of signing false statutory declarations that workers - often migrants doing tiling, painting, gyprocking and formwork - had been properly paid.

Meanwhile, contractors complained they are so squeezed by major construction companies that they had little choice but to hire workers on ABNs to cut costs.

Under Tax Office rules, a construction worker hired on an ABN is still deemed an employee if they are under the control of the contractor, and should get all entitlements. The union estimates there are up to 168,000 sham contracting arrangements in construction in Australia.

In July, Richard Crookes paid $12,628 for Sudanese workers hired by a subcontractor for formwork on the University of Sydney's medical clinic at Nepean Hospital.

Earlier this year, Reed Constructions paid $15,000 for two painters contracted by Finish Corp Australia Pty Ltd for a refurbishment at the Federal Court in Sydney. Finish Corp subcontracted the job to a smaller company.